Answer:
The value of annuity is [tex]P_v = \$ 7929.9[/tex]
Step-by-step explanation:
From the question we are told that
The periodic payment is [tex]P = \$ 250[/tex]
The interest rate is [tex]r = 5\% = 0.05[/tex]
Frequency at which it occurs in a year is n = 4 (quarterly )
The number of years is [tex]t = 10 \ years[/tex]
The value of the annuity is mathematically represented as
[tex]P_v = P * [1 - (1 + \frac{r}{n} )^{-t * n} ] * [\frac{(1 + \frac{r}{n} )}{ \frac{r}{n} } ][/tex] (reference EDUCBA website)
substituting values
[tex]P_v = 250 * [1 - (1 + \frac{0.05}{4} )^{-10 * 4} ] * [\frac{(1 + \frac{0.05}{4} )}{ \frac{0.08}{4} } ][/tex]
[tex]P_v = 250 * [1 - (1.0125 )^{-40} ] * [\frac{(1.0125 )}{0.0125} ][/tex]
[tex]P_v = 250 * [0.3916 ] * [\frac{(1.0125)}{0.0125} ][/tex]
[tex]P_v = \$ 7929.9[/tex]
